Economic Growth, Management, and Smart Power

Abstract

In order for society to increase its standard of living, there needs to be economic growth, and a key component of economic growth is the quality of the managers in the firms of the particular society. Effective managers increase the chances that firms will prosper and the economy of a country will grow. The question then becomes what skills and practices promote high-quality managers. Many answers have been proposed. In this chapter, we review a few theories and argue that a promising theory is smart power management, where the manager seeks to combine hard power techniques of rewards and punishment with soft power techniques such as integrating workers into the decision-making process of the firm. We then attempt to identify whether the principles of smart power management are embodied in three management theories and practices: lean management, Nicholas Bloom’s management theory, and Amazon’s management practices. All three examples share some elements of the idea of smart power management, but they tend to move more toward the idea of hard power management. These examples highlight the difficulty for managers to find the appropriate mix between hard and soft power, but we believe that if the goal can be attained, then firms will be successful and contribute to economic growth.